If you are thinking about trying to finance your business yourself, sometimes the answer may not be as hard as you think. People generally have more assets and access to finance than they realize.
You can start going through this thinking process by doing a thorough account of your assets. In some cases, you are likely to uncover resources you did not know you had. This may include things like savings accounts, equity in real estate, retirement accounts and your vehicle. You may decide to sell some assets for cash or use them as collateral for a loan.
Always try to use as much of your own money as possible. Remember, the larger your own investment, the easier it will be for you to acquire capital from other sources.
However, in the event that the above is not possible, all is not lost. There are various avenues you can explore in order to finance your business. Some of these options include:
Explore local banks, SACCOs and MFIs
Explore your local lenders and see what products they have on offer for businesses. Most lenders such as banks, SACCOs and MFIs have business loans and related products that can help you to access finance. Do not assume the bigger the institution, the better your chances of getting a loan. Smaller community lenders might be more inclined to finance businesses. This is especially true for start-ups. Most loan officers in smaller institutions are more likely to give you individual attention.
Use funds for your retirement
Another option is to use the funds in your individual retirement plan. Within the laws governing the retirement benefit plans, you can actually withdraw money or close the account so that you have unlimited access to your funds. This is usually possible if it is managed by you and not an employer. If you want to withdraw make sure you pay back that amount in full so that it does not affect your future plans.
Use your current salary
If you are employed, another way to finance your business is by saving away some money from your current salary until you have enough to lift off your business. If you do not want to wait, consider your full-time job salary to finance your part-time business. This ensures you will have some steady funds rolling in until your business starts to soar. However, be sure to make sure not to make either one of those endeavors compromise the other.
Friends and family
The best place to start looking for funding is from people who know you and trust you. If you have a friend or relative with some spare cash, talk to them about how to get a loan from them and make sure you map out a plan on how to pay them back. Borrowing from friends and family presents an interesting alternative to traditional forms of financing. This is because it can have some unique advantages, including low or no interest payments. Make sure to pay back that money in full and respect your lender like you would a professional body.
Renting out your home
If you have an extra room or home consider renting out that space. Renting up your apartment on Airbnb, a platform that allows people to put up their apartment on their sites for people to rent for a short period could also bring you income.
Look for Business Angels, Venture Capitals or Private Equity Investors
When trying to secure funding from potential investors make sure you have a clear and succinct business model, avoid jargon, have a financial plan to utilize the money effectively and an exit strategy.
Trying to finance your business can be a challenge for most businesses. Whatever stage your business is in, such as the start-up phase, getting capital for expansion or trying to secure cash flow to hold on during tough business times you will always need a source of cash to help sustain you.
One major reason that causes the decline of businesses is that they undercapitalize their business. You must plan ahead, knowing exactly how much money you need, what you require, what is your break-even point and so on. This knowledge can help you stay on top of your financial situation and be the difference between success and failure.
Learn more:
- Tips on saving money as a business
- Can crowdfunding be an option for your business
- Business angels and Kenyan start-ups
